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It’s October! The fall season has officially began. Do you know what else has started? Federal Financial Aid season. Have you filled in your Free Application for Federal Student Aid (FAFSA) yet? If your child will be graduating from high school next spring, you should take this next step to prepare for your child’s higher education.
What is FAFSA?
FAFSA is the application used to apply for need-based federal financial aid to attend four-year colleges and universities, community colleges, vocational schools, and graduate schools.
Federal student aid is available in a variety of forms. Need-based federal financial aid is typically offered in the form of grants, scholarships, subsidized loans, or work-study. Before you accept any aid, make sure you understand the financial commitments that come with each of them. A Pell Grant will not have to be repaid. Federally subsidized student loans and parental loans must be repaid with interest. Work-study programs allow enrolled students to work part-time to earn money for college costs.
It’s best to submit your completed FAFSA application as soon as possible, as the financial aid is offered on first-come, first-serve basis. So the earlier the submission, the better the chances your child will receive federal monetary assistance. Remember, your CollegeAdvantage 529 account can be used in conjunction with financial aid and scholarships.
Other organizations—like states, universities, colleges, and other organizations—also use the FAFSA to determine what institutional grants or loans to offer students interested in attending their school. Therefore, it is in your family’s best interest to apply for FAFSA to receive need-based federal financial aid as that information is also used to additional avenues for student aid.
October start date
In 2015, the federal government simplified the FAFSA process by moving the start of the financial aid application process to October, which is three months earlier. Previously, the earliest the FAFSA form could be submitted was the first day in January of the year in which your student would start or continue their higher education.
This start date was changed to align the financial aid application process with that of college applications. College-bound students and their families can now find out how much need-based federal financial aid they may receive about the same time they receive college acceptances. Armed with this information, you and your child can better determine what postsecondary schools will offer the best financial fit. By knowing how much federal monetary assistance you may receive, you can best estimate your child’s qualified higher education expenses and so manage the accrued savings in your 529 account.
Since states, universities, colleges, and other private organizations use FAFSA to determine what grants, scholarships, or loans to offer, your family may also learn earlier if there will be any additional financial assistance available.
Prior-Prior Year Tax Return
The federal government now allows FAFSA to be filled out with the income tax return from two years prior, known as “prior-prior year.”
Previously, the federal financial aid application was filled out with the previous year’s tax return information. Most families filed their tax returns after the January FAFSA start date due to when they received their W-2s. This slowed down the financial assistance process. As federal financial aid is given out in a first-come, first-served method, submitting the FAFSA form later because of delayed tax return filings could potentially reduce the amount of federal financial aid.
Now, with the use of the “prior-prior year” tax return, you can more readily fill in the FAFSA starting in October, and therefore, potentially increase the amount of financial assistance.
Universities and colleges also benefit from the use of the “prior-prior year” tax return on FAFSA because it can reduce the amount of time needed to verify asset information since the IRS already has it. The schools can more readily determine and then quickly distribute their financial aid award letters to students.
IRS Data Retrieval Tool
With the use of “prior-prior year” tax return, you can now take advantage of the IRS Data Retrieval Tool (DRT). DRT electronically imports your accurate IRS information to the FAFSA form. This can reduce the amount of errors entered on the application as well as reduce the time needed to complete the form. DRT will also help colleges and universities to speed up their approval process as there will be less need to authenticate the supplied financial information.
For a step-by-step guide on how to file the FAFSA, read this article from NerdWallet. Or you can read this parent-focused guide from the U.S. Department of Education on how to assist your child as they fill out FAFSA. There is also a checklist of information documents to have readily available before you and your child begin to fill in the federal financial aid application. If you would like an estimate of how much financial aid you might receive before doing the FAFSA paperwork, fill in the necessary information using this calculator.
Always fill out FAFSA
You should always fill out the FAFSA, even if you don’t think your child will qualify for any need-based financial aid. You never know for what financial assistance your child might qualify to use with your Ohio 529 Plan. Post-secondary education institutions and other organizations also use the information on FAFSA to determine how to apply their financial aid and scholarships. FAFSA is also used to determine for what federal loans your child may qualify. So collect your paperwork then fill out the FAFSA. Someday your child is going to college. Someday starts with Ohio’s 529 Plan.
Posted on October 7, 2019